Many in Canada’s business community will be watching if Prime Minister Justin Trudeau’s pipeline decisions, expected as early as Tuesday, deliver on his “grand bargain” — carbon pricing for pipeline approvals.
“This is a key test of whether the Trudeau government is going to balance the needs of a resource-based economy with those of a climate agenda,” said John Manley, president and CEO of the Business Council of Canada.
If Trudeau does, there will be wrath – from environmentalists and aboriginals who will never compromise, to proponents and investors who didn’t get the infrastructure they needed.
But no better option than to seek a middle ground has emerged, and it goes some way to restoring the national interest as the key determinant of infrastructure decisions. At this time, the national interest involves supporting a resource-based economy that takes environmental protection seriously. Otherwise, the recession that is devastating Alberta and other resource producing regions.
According to widespread expectations, Trudeau’s Liberal government will rule this week on two proposed Enbridge Inc. pipelines – the replacement of the aging Line 3 and the future of the stalled Northern Gateway. A decision on whether the Kinder Morgan Trans Mountain expansion, due by Dec. 19, could also come any day.
Line 3 and the Trans Mountain expansion are expected to get the green light. Northern Gateway could be permanently sidelined.
Manley said Canada’s business community, including the business leaders represented by his organization, have signed on to carbon pricing as long as it means getting resources out of the ground and to their customers.
“I would be very surprised if there were no pipelines emerging from this,” Manley said on the sidelines of last Friday’s Bennett Jones Business Forum in Lake Louise, Alta., where discussion about the future of energy infrastructure was front and centre. “Acquiescence to a price on carbon really is looked at as one side of a grand bargain that would see pipelines built in return.”
So far, however, Trudeau has shown a lot of enthusiasm for feel-good environmental initiatives, and little for controversial pipeline approvals.
Perrin Beatty, president of the Canadian Chamber of Commerce, said there is a lot of curiosity among his members about Trudeau’s pipeline strategy and how it will be managed in the face of stubborn opposition.
“Certainly, there is a sense that the government is putting in place a series of building blocks that are part of a broader strategy than simply looking at each project on its own,” he said.
Those blocks include pricing carbon, restructuring regulatory processes, a marine protection plan, and a Northern Gateway denial to show not all projects will get approved.
“The stakes are so very high for Canada, not just for the groups that have been at the table,” Beatty said. “It is critical for us to resolve this issue. We need to move away from how we are going to move our resources to market, to how it’s going to be done.”
Beatty said energy consumers tell him they are interested in Canada’s oil and gas, but are concerned about Canada’s ability to deliver in a timely manner, so they are going elsewhere.
“Delay equals denial,” Beatty said. “For the business community, an early no is better than an indefinite maybe that simply drags you out forever as you continue to pump millions of capital into a project, only to find it can’t go ahead.”
The Chinese are among those customers. Chinese companies invested heavily in Canada’s oilsands with the understanding that pipelines to the West Coast would be built so they could export their oil.
Wenran Jiang, director of the Canada-China Energy & Environment Forum, said they would welcome a Trans Mountain expansion, even if Northern Gateway doesn’t move forward. Two top Chinese companies, Sinopec Corp. and CNOOC Ltd., are among Northern Gateway’s backers.
“The Chinese are still concerned about energy security, so any future energy import from Canada is still being seen in a positive way,” Jiang said, noting that the Chinese are willing to wait. With cheap oil readily available in an oversupplied market, imports from Canada are not as urgent.
But infrastructure delays have made it harder for the energy sector to withstand the oil price downturn of the last couple of years.
Perry Spitznagel, Calgary managing partner and vice-chair of Bennett Jones, said energy leaders would be disappointed if a consensus isn’t achieved to allow pipelines to move forward.
“It hasn’t been a particularly positive business environment in the last 18 months, largely as a result of energy prices, but also as a result of government policies that are clearly not favouring the energy sector and making it a little more difficult for people to compete in a world market,” he said.
The carbon-price for pipeline-approval bargain would break new ground in the post-Paris climate change agreement world. Other political leaders, including former Conservative Prime Minister Stephen Harper and U.S. President Barack Obama, wouldn’t pay the political price. Trudeau can show that environmental leadership requires building national wealth.
On Wednesday, Jim Carr, Canada’s Minister of Natural Resources, is scheduled to address Calgary’s business community with an update on market access for Canada’s energy products.